Halal student loan: Sharia-compliant student finance available after 2025

Halal student finance will be available in England after 2025, making it one of the world’s first state-backed student loan schemes that is Sharia-compliant.

Alternative Student Finance (ASF) will be introduced after the launch of the lifelong loan entitlement (LLE), which will replace the current student loan system in 2025.

It means Muslim students who don’t want to take out interest-bearing loans can finally access student finance.

“The introduction of the Lifelong Loan Entitlement (LLE) means that ASF will become available after 2025 to make sure it matches mainstream student finance, which from 2025 will be the LLE,” said the DFE in a blog post last month.

Islam Channel has written several articles in recent years chronicling the struggles of Muslim students trying to access halal student finance.

Groups such as Muslims Census, National Zakat Foundation, Islamic Finance Guru, and student advocate Asha Hassan, have played a key role in ratcheting the pressure on the government to finally come good on their promise.

Back in 2013, then Prime Minister David Cameron said the government was committed to creating a Sharia-compliant alternative student finance product for Muslim students.

Research shows that traditional interest-based loans act as a barrier to higher education for Muslims or cause financial hardship for those who choose to study at university.

How it will work

ASF will be Sharia-compliant and will use the Islamic finance principle of Takaful.

Those who use ASF will pay the same amount towards their studies as those who use the standard student loan system.

Prospective undergraduate students will apply for an ‘alternative payment’ for their tuition fees and living costs instead of a traditional student loan.

Like existing student loans, applications will be made through Student Finance England.

After finishing or leaving their studies, students will repay contributions to a fund that will only be used to help future students access ASF.

Long time in the making

The UK Government first proposed a student finance product consistent with Muslim beliefs in 2013.

The Higher Education Research Act 2017 allowed the government to introduce such a product, but no product was introduced. The issue has been raised in Parliament several times, with the delay described as “shameful” by Lord Sharkey.

In July 2023, the government published a policy paper on its plans for alternative student finance in England. They confirmed the new product would be:

  • based on the Islamic finance principles of Takaful;
  • available to any undergraduate students eligible for student finance;
  • managed by the Student Loans Company and identical in terms of available funding and repayment amounts and timings;
  • available “as soon as possible” after 2025.

The government said it is working with the Islamic Finance Council UK to ensure alternative student finance complies with Sharia law. It also said it would need to create secondary legislation to determine how the new system will work.


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